Strengthening Nokia’s position in optical network solutions, Infinera’s expertise in advanced optical semiconductors will help the Finnish telecommunications and electronics company develop new optical products and solutions.
Nokia’s recently agreed $2.3bn acquisition of Infinera values the optical semiconductor manufacturer – whose director of solutions marketing, Paul Momtahan, provided insight to Electro Optics readers recently, on the post-silicon future of semiconductor materials – at $6.65 per share, representing a 28% premium to Infinera’s closing share price before the announcement.
After recently setting two new optical transmission world records – the first a new optical speed record for transoceanic distances with Nokia Bell Labs, and the second achieved in collaboration with subsidiary Alcatel Submarine Networks (ASN) – Nokia now plans to sell ASN to the French State for $375m, allowing the Finnish telecommunications firm to focus on core markets and improve the profitability of its network infrastructure.
Restructuring Nokia’s Optical Networks business
Part of that changing focus involves the acquisition of Infinera, which will in turn enable the accelerated development of new products and solutions for Nokia, strengthening its optical networking technology. Targeting $215m of net comparable operating profit synergies by 2027, Nokia hopes the restructuring to provide both financial and strategic advantages, moving the Optical Networks business towards a double-digit operating margin.
Nokia’s move to increase organic investment in Optical Networks in 2021, with the intention to improve competitiveness, has seemingly paid off, delivering “improved customer recognition, strong sales growth and increased profitability,” according to Nokia president and CEO, Pekka Lundmark. “We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks,” said Lundmark. “The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles.”
Infinera brings expertise to Nokia’s house
An expanded digital signal processor (DSP) development team, deeper competency in photonic integrated circuit (PIC) technology and industry expertise across silicon photonics and indium phosphide-based semiconductor material sciences will be some of the new in-house capabilities available to Nokia after the acquisition of Infinera, who’s founder and chief innovation officer – and Photonics100 honouree – David Welch is widely credited with achieving the first commercial optoelectronics integrated circuit. Infinera’s presence in the North American markets and with webscale clients are also clear markers in the attractiveness of the deal. Infinera’s recent development of high-speed, low-power optical components for intra-data center (ICE-D) applications, meanwhile, will provide Nokia with meaningful opportunities to introduce more AI workloads and achieve long-term growth.
Infinera benefits from Nokia experience
It’s not just Nokia this deal stands to benefit either, of course. “We are really excited about the value this combination will bring to our global customers,” said David Heard, Infinera CEO. “Across telecom networks, inter-data centre applications and now inside the data centre,” said Heard, “Nokia is an excellent partner, and together we will have greater scale and deeper resources to set the pace of innovation and address rapidly changing customer needs at a time when optics are more important than ever.”
“The combination will further leverage our vertically integrated optical semiconductor technologies,” said Heard, and “our stakeholders will have the opportunity to participate in the upside of a global leader in optical networking solutions.”
Nokia’s acquisition of Infinera has been unanimously approved by both Nokia and Infinera board of directors, with the aim to close in the first half of 2025 – subject to the approval of Infinera’s shareholders, regulatory approvals and other foreign direct investment approvals and closing conditions, and the sale of ASN is expected to close at the end of 2024 or first quarter of 2025, subject to the formal consultation of ASN’s French Works Council and other closing conditions and regulatory approvals.
